Need help assessing a commercial property

[eternit]

Hi,

I have had an offer accepted on a Commercial Property for $365K. The property is in Canberra. It has a land of around 900sqm. It has a warehouse building of total 400sqm. This is 2 levels, top level is 200sqm and bottom level is 200sqm. The property sloped down to the back and the two levels are not on top of each other and has their own access via big roller doors.

The property has a taxable land value of around $260K and the building is full brick. There is a tenant in their who is a friend of the current owner and is paying a rent of $20000 excluding GST which is very cheap. The lease is 1 year but the tenant is happy to only lease the back part (200sqm) for the same price so he is happy to modify the existing lease.

I am planning to have the back part rented while I use the front part of 200sqm for storing stock for retail shops I have.

Obviously the yield is only 5.5% and currently the tenant is not paying the outgoings. The outgoings are around $5K per annum.

I will be talking to few comm agents tomorrow to get an idea of what the rent should be if the whole property was tenanted in today's market.

I would like to get some opinions from others about this.

Thanks.

 

[DaveM]

From an initial glance, your new yield is 10.9% not 5.5% as you are owner occupying half of the premises so yield should be calculated on half the purchase price ie $182500.

Hardly a yield to sneeze at. On charge partial or full outgoings and you are even happier.

 

[Macca]

If your using half, then the costs of that half are your debts

Yield for the rented back half would be calculated on about 40-45% of value as you have street visibility. The front one always rents for more $M2 as it is easier to find and a sign could be seen as people drive past.

If we use 45% that is $164250 with a return of $20k = 12.17% without allowance for OG.
In the past when I had strata industrial I would have been collecting 45% of OG on top of that.

 

[pinkboy]

From an initial glance, your new yield is 15% not 5.5% as you are owner occupying half of the premises so yield should be calculated on half the purchase price ie $132500.

Hardly a yield to sneeze at. On charge partial or full outgoings and you are even happier.

I hope you don't apply that maths to your own investments?


pinkboy

 

[eternit]

Thanks for the reply guys. Just to confirm the property is no strata. Its on 1 title.

 

[DaveM]

I hope you don't apply that maths to your own investments?


pinkboy

LOL not enough coffee when I typed that

 

[eternit]

Is 11% yield good for a torrens titled property in a well developed metro area?

 

[Scott No Mates]

Always use net rent ie (gross income - outgoings)/market value but I wouldn't knock it back for a regional property.

 

[eternit]

This is not regional

 

[Scott No Mates]

This is not regional

Unless it is Sydney or Melbourne, it IS regional.

 

[vaughan]

Unless it is Sydney or Melbourne, it IS regional.

Yeah it's not like Canberra is a capital city.

Oh, hang on....

 

[wobblysquare]

Shipping containers

Could you use some of the 900m2 to put a shipping container or two on and use this space for your storage.
Then rent out the other 200m2.

Just a thought.

 

[eternit]

Could you use some of the 900m2 to put a shipping container or two on and use this space for your storage.
Then rent out the other 200m2.

Just a thought.

Its not a bad idea but I would like to have the 200m2 of space to set up the warehouse properly as we will have a lot of stock otherwise we will have to find a bigger space in future.